System and method for simulating an electronic trading environment

ABSTRACT

Market data is recorded from a real live exchange. The recording data can be played back in real time or delayed, in any manner, to simulate the recorded market. Moreover, one or more users can participate in the simulated market just as if they were participating in a real-live market. The system provides a realistic trading environment without the associated risks of trading in a live-market such as losing money and the cost of making trades. The system may be used for training purposes and for purposes of testing and analyzing various trading strategies. Software developers and testers may also utilize the realistic environment to develop trading products or applications. Additionally, the system provides a means for demonstrating trading application products.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.12/604,245, filed Oct. 22, 2009, which is a continuation of U.S. patentapplication Ser. No. 10/233,023, filed Aug. 30, 2002, now U.S. Pat. No.7,672,895, which claims the benefit of U.S. Provisional PatentApplication No. 60/358,209, filed Feb. 19, 2002. The entire disclosurecontents of these applications are herewith incorporated by referenceinto the present application.

FIELD OF THE INVENTION

The present invention is generally directed to electronic trading, andin particular, to simulating an electronic trading environment.

BACKGROUND

Many exchanges throughout the world now support electronic trading.Electronic trading has made it possible for an increasing number ofpeople to actively participate in a market at any given time. Theincrease in the number of potential market participants hasadvantageously led to, among other things, a more competitive market andgreater liquidity.

Exchanges that support electronic trading are generally based on a host,one or more computer networks, and clients. In general, the hostincludes one or more centralized computers to form the electronic heart.Its operations typically include order matching, maintaining order booksand positions, price information, and managing and updating a databasethat records such information. The host is also equipped with anexternal interface that maintains uninterrupted contact to the clientsand possibly other trading-related systems.

Typically, market participants link to the host through one or morenetworks. A network is a group of two or more computers linked together.There are many types of networks such as local area networks and widearea networks. Networks can also be characterized by topology, protocol,and architecture. However, any type of network configuration can be usedin electronic trading. For example, some market participants may link tothe host through a direct connection such as a T1 or ISDN. Someparticipants may link to the exchange through direct connections andthrough other common network components such as high-speed servers,routers, and gateways, and so on.

Regardless of the way in which a connection is established, softwarerunning on the clients allows people to log onto one or more exchangesand participate in one or more live markets. Some clients run softwarethat creates specialized interactive trading screens. In general, thetrading screens enable people to enter orders into the market, obtainmarket quotes, and monitor positions. The range and quality of featuresavailable varies according to the specific software application beingrun.

What is needed, however, is a system for simulating an electronictrading environment, such as simulating the one described above, to usefor any purpose without having the known risks often associated withtrading in live-markets at real exchanges.

BRIEF DESCRIPTION OF THE FIGURES

FIG. 1 is a block diagram of a system for simulating an electronictrading environment in accordance with the present invention;

FIG. 2 is a flow chart illustrating an example process for recording andstoring market information;

FIG. 3 is a block diagram of an example data file that can be used tostore market information;

FIG. 4 is a graphical illustration for showing an alternative way toview how market information can be used;

FIG. 5 is block diagram used to illustrate how information may becommunicated between various components of a trading simulator, amatching engine, and trading application;

FIG. 6 is a flow chart illustrating how the components shown in FIG. 5might interact to simulate an electronic environment; and

FIG. 7 is a graphical illustration of an example two-pane interface forrecording and playing market information.

DETAILED DESCRIPTION

The present embodiments provide a system and related methods forrecording market data from an exchange and from other trading-relatedsources, and generating orders based on that data to simulate therecorded market. Then, one or more users may participate in thesimulated market just as if they were participating in a real-livemarket. According to one embodiment, a market simulator generatesorders, among other things, based on the recorded data and submits thoseorders to a simulated exchange. Users can also submit orders to thesimulated exchange. The simulated exchange receives orders from themarket simulator and orders from the users and attempts to match themjust like a real exchange. As a result, the system provides a realistictrading environment without the associated risks of trading in alive-market such as losing money and the cost of making trades. Thesystem may be used for training purposes and for purposes of testing andanalyzing various trading strategies. Software developers and testersmay also use the realistic environment to develop trading products orapplications. Additionally, the system provides a means fordemonstrating trading application products.

Illustrative embodiments and example applications of a system andrelated methods for simulating an electronic trading environment willnow be described with reference to the accompanying Figures to discloseadvantageous teachings of preferred embodiments of the presentinvention.

System Architecture Overview

FIG. 1 is a block diagram of a system 100 for simulating an electronictrading environment in accordance with the present invention. It shouldbe noted that the system 100, as shown, could be used transparently inexisting trading systems. That is, using the example system 100described in FIG. 1, the user can log onto the simulated exchange 102 inthe same fashion as logging onto a real-live exchange 104. That way, theuser can trade with a simulated market at exchange 102 using the sametrading applications and client devices that they would normally use totrade with a real-live market. Thus, the feel of the simulation is morerealistic. However, it should also be understood that alternative systemarchitectures might be utilized instead of the system architecture inFIG. 1. Details regarding some alternative system architectures areprovided below, however, using the teachings described herein, oneskilled in the art can modify and/or tailor the system or anyalternative system in any fashion to suit his or her needs.

According to the embodiment of FIG. 1, the system 100 generally includesa market simulator 112, simulated exchange 102, in addition to one ormore host exchanges 104, one or more gateways 106, and one or moreclient devices 108. A host exchange 104 might include an ElectronicCommunication Network (ECN) like Island, which is a well-knownelectronic trading facility. Other host exchanges include the ChicagoMercantile Exchange (CME), the Xetra (a German stock exchange), and theEuropean derivatives market (Eurex). The gateways 106 are computers, orsoftware program(s), running software that receives information from thehost exchange (e.g., price, order, and fill information). The clientdevice 108 is a computer, or software program(s), which receives one ormore data feeds from the gateways 106 via network 110. The hostexchanges 104, gateways 106, client devices 108, market simulator 112,and simulated exchange 102 are explained below in their respectivesections.

Each host exchange 104 might provide different types of information, andrelays this information, or a portion thereof, collectively referred toas a data feed, over network 110 to market participants or traders. Adata feed from one host exchange may contain different informationrepresenting different tradeable objects than another data feed from asecond exchange. However, it is not necessary in the preferredembodiment that the data feeds from host exchanges include similar ordifferent data. As used herein, the term “tradeable objects” referssimply to anything that can be traded with a quantity and/or price. Itincludes, but is not limited to, all types of tradeable objects such asfinancial products, which can include, for example, stocks, options,bonds, futures, currency, and warrants, as well as funds, derivativesand collections of the foregoing, and all types of commodities, such asgrains, energy, and metals. The tradeable object may be “real”, such asproducts that are listed by an exchange for trading, or “synthetic”,such as a combination of real products that is created by the user.

In general, a data feed may include information representing prices andquantities for a tradeable object. For example, a data feed couldcontain market depth information in addition to inside marketinformation. The inside market includes data representing the highestbid price (highest buy price) with quantity and the lowest ask price(lowest sell price) with quantity. Market depth includes datarepresenting each available pending bid and ask quantity (or anyaggregation or combination thereof), entered at a particular price, inaddition to the inside market. The data feed can contain other types ofmarket information such as the last traded price (LTP), the last tradedquantity (LTQ), total traded quantity (TTQ), order information, and/orfill information. The information in a data feed, whether it containsinside market and/or market depth information or additional marketinformation, is generally categorized into three groups referred to asprice, order, and fill information.

In an embodiment, each host exchange 104 sends a data feed to a gateway106. The data feed preferably carries all of the information that thehost exchange 104 provides, such as price, order, and fill information,and alternatively may include more (or less) information. Host exchange104 may send its data feed to the gateway 106 through one or morenetworks. A network is a group of two or more computers linked together.There are many types of networks such as local area networks and widearea networks. Networks can also be characterized by topology, protocol,and architecture. However, any type of network configuration can be usedin electronic trading. For example, some market participants may link tothe host through a direct connection such as a T1 or ISDN. Someparticipants may link to the exchange through direct connections andthrough other common network components such as high-speed servers,routers, and gateways, and so on. A common network that utilizes avariety of direct connections and other common network components is theInternet.

As mentioned earlier, gateway 106 is one or more computers (orprogram(s)) that receive information from the host exchange 104. As usedherein, a computer includes any device with memory and a processorcapable of processing information to produce a desired result oroutcome. Thus, a gateway can be a computer of any size such as a server,workstation, personal computer, or laptop, but generally, the gateway isany computer device that has the processing capability to perform thefunction described herein. A program represents a sequence ofinstructions that can be executed by a computer. Note also that thefunctions of a gateway could be moved to a host exchange and/or clientdevice to reduce or eliminate the need for the gateway.

In an embodiment, gateway 106 receives a data feed from a host exchange104. Preferably, the gateway 106 receives the data feed and converts itto a form compatible with the protocols used by the client device 108using conversion techniques known in the art. In addition, as known bythose skilled in the art, gateway 106 may have one or more servers tosupport one or more data feeds, such as a price server for processingprice information, an order server for processing order information, anda fill server for processing fill information. Generally, a server is acomputer or program that responds to commands from a client in the formof subscriptions. That is, a trader at a client device can subscribe toprice information, order information, and fill information for thatexchange. Once a client device 108 has subscribed to the information,the gateway 106 publishes the information to the client device 108.

As mentioned before, client device 108 includes one or more computers(or program(s)) that allow a trader to participate in a market at a hostexchange 104. In general, it uses software that creates specializedinteractive trading screens on the client device's terminal. The tradingscreens enable traders to enter and execute orders, obtain marketquotes, and monitor positions. The range and quality of featuresavailable to the trader on his or her screens varies according to thespecific software application being run.

A commercially available trading application that allows a user to tradein a system like that shown in FIG. 1 is X_TRADER® from TradingTechnologies International, Inc. of Chicago, Ill. X_TRADER® alsoprovides an electronic trading interface, referred to as MD Trader™, inwhich working orders and/or bid and ask quantities are displayed inassociation with a static price axis (or scale). The preferredembodiments, however, are not limited to any particular product thatperforms the translation, storage and/or display functions. Portions ofthe X_TRADER® and the MD Trader™-style display are described in U.S.patent application Ser. No. 09/590,692, entitled “Click Based TradingWith Intuitive Grid Display of Market Depth,” filed on Jun. 9, 2000, nowU.S. Pat. No. 6,772,132, and U.S. patent application Ser. No.09/971,087, entitled “Click Based Trading With Intuitive Grid Display OfMarket Depth and Price Consolidation,” filed on Oct. 5, 2001, now U.S.Pat. No. 7,127,424, the contents of both are incorporated by referenceherein. Moreover, the trading application may implement tools fortrading tradeable objects that are described in a U.S. patentapplication Ser. No. 10/125,894 filed on Apr. 19, 2002, entitled“Trading Tools for Electronic Trading,” now U.S. Pat. No. 7,389,268, thecontents of which are incorporated by reference.

Market simulator 112 is a software program (or programs) hosted at acomputer. In an embodiment described with respect to FIG. 1, the marketsimulator 110 is connected to one or more host exchanges 104 so thatmarket data can be recorded directly from one or all of the hostexchanges 104. The recorded data may be stored at a computer, in adatabase, or some other known storage means. In a preferred embodiment,the market simulator 112 generates orders based on the recorded data andsubmits those orders to the simulated exchange 102. Preferably, themarket simulator 112 recreates the market as it once was, replicatingorder entry of hundreds, if not thousands, of traders. The marketsimulator 112 forwards orders to the simulated exchange 102 for possiblematching and execution.

Simulated exchange 102 is a software program (or programs) hosted at acomputer. In the embodiment described with respect to FIG. 1, thesimulated exchange 102 receives orders from the market simulator 112 andmatches them in a similar fashion to a real exchange. Alternatively, thesimulated exchange 102 can be programmed in many different ways tosimulate the matching behavior of different exchanges or to implement aunique matching algorithm. Users can participate in the simulated marketin the same ways that a user can participate in real exchanges (e.g., bysubmitting buy and/or sell orders to the simulated matching engine 102via client devices 108).

It should be understood that the system architecture shown in FIG. 1 isone example of the many ways in which the simulated trading environmentmay be implemented. For example, according to another embodiment, themarket simulator 112 and the simulated exchange 102 do not necessarilyhave to communicate with the host exchanges 104. In this embodiment,market data can be recorded and stored separately. The market simulator112 can access the stored market data and then play back in a similarfashion as in the embodiment described with respect to FIG. 1. In yetanother embodiment, market simulator 112 and simulated exchange 102 areboth hosted at the client device 108. In this embodiment, a user cantrade against the simulated market on his or her machine without theneed for a network connection.

Recording Market Data

FIG. 2 is a flow chart 200 illustrating an example process for recordingand storing market information. The example flowchart 200 includes thesteps of connecting to a data feed 202, getting updates 204, and storingupdates into market information 206. It should be understood that theflow chart 200 provides only an illustrative description, and that moreor fewer steps may be included in the flow chart 200, and/or the stepsmay occur in one or more orders which are different from the order ofsteps shown in the Figure.

In step 202, a market simulator connects to a data feed. In oneembodiment, the data feed may contain price information from a live feedof an exchange. The price information can come as price updates or as acomplete picture of the market at periodic intervals. Although it is notnecessary, the data feed might also contain order information and fillinformation. Other information may also be provided such as last tradedprice (LTP), last traded quantity (LTQ), total traded quantity (TTQ),total traded quantity, highs and lows, and exchange status. Note thatthe system could be programmed to record the information contained inany data feed available from an exchange or similar informationprovider. In another embodiment, a data feed may also contain tradingrelated news, or equivalently, news that affects the market in somemanner (e.g., unemployment numbers, etc.). Sometimes, it is beneficialto record news so that it can be re-played along with the marketinformation to create an ultra-realistic trading environment. In thisembodiment, the market simulator could record news feeds frominformation providers such as Bloomberg, Reuters, and other suchinformation providers.

In step 204, updates are retrieved. Some exchanges provide informationin the form of updates (provide only values that change) rather thanprovide information in the form of a snapshot (or a copy of all valueswhether or not they have changed) of the market at periodic intervals.For example, some exchanges give price updates. A price update mightoccur when quantity available at a price level changes. To illustrate aprice update, assume that there is a bid quantity of 100 at a price of50. Some time later, the bid quantity might have changed to 75 at theprice of 50. A price update in this example would indicate the changefrom 100 to 75 at the price of 50. However, some exchanges do notprovide price updates, but rather provide a snapshot or copy of allvalues in the market at periodic intervals whether the values changed ornot. Using the above example, three snapshots of the market at threesequential time intervals might look something like 100 at a price of 50(first interval), 100 at a price of 50 (second interval, assuming thatthe quantity has not yet changed), 75 at a price of 50 (third interval).In the instance where updates are not provided, the system can generateupdates from the snapshots by comparing values at sequential intervals.According to the snapshot example above, an update would have beenrecorded between the second and third intervals. Storing only theupdates can reduce the amount storage needed. Moreover, news events canbe recorded in a similar fashion (e.g., news updates or snapshots of thenews can be taken at periodic intervals).

In step 206, updates are stored. Updates (e.g., price updates, newsupdates, LTP, LTQ, TTQ, total traded quantity, highs and lows, exchangestatus, etc.) may be stored in permanent or semi-permanent form. Thestored information is collectively referred to as market information.Although playback is described below, during playback, marketinformation is used to simulate the market and/or conditions thatoccurred during the time in which the data was recorded. Marketinformation can be played immediately (real time), or it can be delayedand played at any time in the near or distant future. For example, thedata can be recorded and played back immediately, or the data can berecorded and some time later (while it is still recording) the data canbe played back, or the data can be recorded and some time after therecording is complete (e.g., stopped recording) the data can be playedback.

FIG. 3 is a block diagram of an example data file 300 used to storemarket information. According to this embodiment, the data file 300includes a time stamp 302, price level 304, activity code 306, new value308, old value 310, and code 312. The Figure shows one preferable typeof data file format suitable for the use with the present embodiments,however, other types of data file formats or formats with more or fewerinformation fields may be utilized.

Referring to example data file format 300, time stamp 302 is preferablystored in units of milliseconds since midnight. This allows recordingsto be time synced, but alternative methods of synchronizing can be used.Time stamps based on alternative units and reference points may be used.Price level 304 stores price levels in ticks, where a tick is the lowestvalued price unit for the tradeable object. Activity code 306 stores acode that is used to represent the kind of information contained in thedata file format for a particular row of information. For example, an“@” symbol might indicate the beginning of the file, a “˜” symbol mightindicate a change in quantity at the price level, a “T” might indicatethat a trade has occurred, and an “N” might indicate news. New value 308stores the new quantity if the activity code for that row contains a “˜”symbol, but alternatively, new value 308 may be used to store othertypes of information associated with the activity code 306. Old value310 stores the old quantity if the activity code for that row contains a“˜” symbol, but alternatively, old value 310 can store other types ofinformation associated with the activity code 306. Code 312 can storeother types of information such as seed values like volume, open price,closed price, settlement, last traded price, etc.

FIG. 4 is a graphical illustration for showing an alternative way toview how market information might be used. Example numbers are used inthe graphical illustration. The changes in quantity are recorded at foursample price levels 100, 101, 102, and 103. Proceeding forward in time,the quantity at price level 100 has changed from 80 to 75, 75 to 80, 80to 85, 85 to 90, 90 to 95 and so on. Quantities at other price levelshave changed as well. Preferably, the data file format stores only thechanges so that if a few changes (e.g., 5 changes) occur over a longperiod (e.g., 1 hour), then only the changes are recorded versusrecording the data over the period (e.g., recording 5 changes versusrecording 1 hour worth of data). Even though the data file stores onlythe changes, it preferably contains the same amount of information asstoring data collected over the entire period. Moreover, because the oldvalues (in addition to the new values) are stored when a change occurs,the system can play the file in reverse just as efficiently as inforward motion without the need to laboriously scan ahead in the filefor values.

Referring back to FIG. 3, the data file format 300 should be accessedsequentially, because according to this embodiment, the data is the sumof the event up to this point. Therefore, seeking a specific time pointis found by playing forward or reverse until the specified time point iscrossed.

As mentioned earlier, it is preferable to store the information in unitsof milliseconds since midnight. To play one-second of data, the currenttime stamp is tracked, and 1,000 is multiplied by it. To play at someother speed, another offset may be chosen. For example, if the currenttime stamp is multiplied by 500 then the data will play back half the“normal” speed, whereas if the current time stamp is multiplied by 2,000then the data will play back two times the “normal” speed.

Preferably the system can replay market data in real time, orequivalently, as it happens in the market. However, it should be notedthat to play the data in real time, it might be beneficial to take intoaccount the actual processing time between updates, in which theprocessing time needed may related to the type of processor used, theoperating system limitations, and so on. Due to slower processing times,drift might occur. An example is provided to illustrate how in oneembodiment the problem of drift may be dealt with. Assume that an updateof market information occurs at one second intervals (e.g., 1, 2, 3, 4,5 . . . ). Assume also that the system requires 1.5 seconds to apply theupdate at time 1. (Note that this is an extreme example, normalprocessing time may be only in the milliseconds or less.) Therefore, thesystem is ready to process another update 2.5 seconds later, but itwould have skipped the update at the 2-second interval. To resolve thisproblem, at the 3-second interval, the system would apply any missedupdates including the update at the 3-second interval. For this example,the system would then apply both of the updates: one update for the2-second interval and one update for the 3-second interval. Thus,according to this embodiment, all data updates are preferably used,rather than dropping updates because of slow processing time.

Another solution includes playing back every single update that isreceived from the data feed one at a time, rather than in blocks oftime. The alternative solution can accurately follow the originalrecording (although at a playback rate very different from theoriginal), which would then allow very accurate trading strategy testingto occur.

Simulating a Market

In general, the recorded market information is used by the marketsimulator to generate orders by “reverse engineering” the recordedmarket information back into orders. The generated orders are sent to asimulated exchange. The simulated exchange matches the orders anddisseminates fill and/or price information. As a result, generatedorders and fill and/or price information from the simulation will matchprecisely (or almost precisely) to the order and fill and/or priceinformation as it occurred in the real market at the time it wasrecorded. Because orders are generated and sent to a simulated matchingengine, the system also allows one or more traders to participate inthis simulated trading environment. To accomplish this, the system, suchas the example system in FIG. 1, generally includes a market simulatorand a simulated exchange. Moreover, the system includes a tradingapplication hosted on a client device if a trader is participating inthe simulated trading environment.

FIG. 5 is block diagram used to illustrate how information is preferablycommunicated between various components the system including a marketsimulator 500, a simulated exchange 502, and trading application 504.Generally, the market simulator 500 includes a stored market order book506 and a simulated market order book 508. The trading application 504includes an order book 510. The stored market order book 506 representsthe recorded market. It might represent, among other things, therecorded inside market, and if available, the recorded market depth. Thestored market order book 506 provides the next state of market values(e.g., price levels, quantities, etc.). The simulated market order book508 represents the current state of the simulated market such asorders/fill information sent from the simulated exchange 502. Therefore,the simulated market order book 508 reflects the market activity thatoccurs at the simulated exchange 502.

FIG. 6 is a flow chart 600 for illustrating how the components shown inFIG. 5 might interact to simulate a market. Note that the flow chart 600illustrates a method for simulating the market, and does not necessarilyallow a user or users to “move” the markets for a long period (e.g., bysubmitting large orders). Rather, in a preferred embodiment, the systemattempts to equalize the simulated market with the recorded market.Because the method directly simulates the recorded market, it becomes auseful tool to test trading strategies to determine how well thestrategy would have worked in a real market. Other advantages aredescribed below.

In step 602, market information, which is stored in a data file formatsuch as that shown in FIG. 4, is retrieved from storage. If marketinformation includes news (or other types of recorded data), then thenews (or other types of data) would preferably be directed to a separatecomponent for output to the user(s). Per step 604, the stored marketorder book is updated to reflect the market information received in step602.

In step 606, order and fill information is received from the simulatedexchange. Order information may include orders, which have beensubmitted to the simulated exchange for matching. According to apreferred embodiment, submitted orders may come from users activelytrading with the system and/or the orders may be generated from thestored market information (e.g., see step 614). Per step 608, thesimulated market order book is updated to reflect orders and fills.

In step 610, the stored market order book and the simulated market orderbook are compared. This step allows the system to compare and thenequalize (e.g., see step 612) the two order books so that the system canaccurately simulate the recorded market. In a preferred embodiment, thetwo order books are compared and orders are generated (e.g., see step612) in such a way as to equalize the two order books. The generatedorders are sent to the simulated exchange (e.g., see step 614).

In step 612, the two order books are equalized by making adjustments toconform the two order books. The algorithm below serves to synchronizethe stored market order book to the simulated market order book. Aspreviously stated, orders and/or other types of transactions (e.g.,delete orders) are generated as a result of comparing the two orderbooks. However, if the two order books are the same, then orders and/orother types of transactions need not be generated. The algorithm belowprovides one way to generate orders and/or transactions which are thensent to the simulated matching engine. Note that the invention is notlimited to any particular algorithm, and different algorithms mayalternatively be used, depending on how it is programmed.

In a preferred embodiment, to update the simulated market order book:Send delete buy order messages to the simulated matching engine todelete orders with a price >Old buy inside price or New sell insidemarket price. Send delete sell order messages to the simulated matchingengine to delete orders with a price <Old sell inside market price orNew buy inside market price. If so desired, send delete messages todelete all orders outside the range of depth provided by the simulatedexchange. For example, some exchanges provide 5 price levels of marketdepth, therefore, delete any orders outside of that range. For everyprice level in simulated market order book: If the simulated order book508 quantity is above the stored market order book 506 quantity, thendelete enough orders (using LIFO last in first out to best guess thebehavior of a real market) by sending a delete transaction message tothe simulated exchange 502 to equalize them. In some instances, it maybe necessary to delete more than enough orders, and then add quantitylater. For example, if the old value is 20 which is made up of two10-lot orders and the new value is 15, then one 10-lot order should bedeleted and an order for 5 should be added (see the next step for addingorders). Alternatively, all of the orders could be deleted (e.g., thetwo 10-lot orders in the above example) and an order for 15 could beadded, but might undesirably impact the way the orders are matched atthe simulated exchange 502. In another alternative embodiment, ratherthan adding and deleting orders, orders in the simulated market can bechanged using the simulated exchange's order change mechanism toaccomplish a similar result (this might also impact the way orders arematched at the simulated exchange 502). If the simulated order book 508quantity is below the stored market order book 506 quantity, then sendone or more orders to the simulated exchange 502 to equalize them. Ifthe following is true: inside buy price new LTP inside buy price, thensend an opposing order with a quantity equal to the LTQ to the simulatedexchange 502 and also increase quantity at that price level by LTQ, andif not then seed the simulated exchange 502 with the LTP and LTQ. Toseed other types of market information by directly inputting values tothe simulated exchange 502: seed the simulated exchange 502 with volume,highs and lows, settlement, open, close, and other types of marketinformation, if needed.

In one embodiment, all incorrect order levels are adjusted every time anupdate is performed. For example, if someone filled against alloutstanding working orders, the next time orders are updated, all of theorders levels are immediately (or near immediately) corrected.

In another embodiment, the trading simulator attempts to replace theincorrect orders in a more natural manner. Orders that have been filled(or orders added/deleted) are scheduled for replacement some time, whichis adjustable, in the near future. For example, a random time may beselected within the next 15 seconds for the equalization of the twoorders books to occur (e.g., adding orders or deleting orders, etc.).For example, if someone were to match against all outstanding orders atthe simulated exchange, the deleted outstanding orders are preferablyreplenished at random intervals over the following 15 seconds (similarto what might happen in a real market). Preferably, this delay inreplacement is circumvented if there is any change to the price levelfrom the incoming data stream (an update in the price data has priorityover a delayed replenishment). Other types of equalization methods maybe used to equalize the simulated market order book with the storedorder book in a more natural manner.

Interface for Recording and Playback

FIG. 7 is a graphical illustration of an example two-pane interface forrecording and playing market information in accordance with the presentembodiments. The recording pane 700 is used to record marketinformation, and the playback pane 712 is used to playback the marketinformation. Of course, other types of interfaces for recordinginformation and playing it back may be used. The interface gives anadministrator or user the ability to record market information from anyexchange and/or information provider and play it back at the time ofrecording or some time later. The more information that can be recordedand played back, such as the inside market, market depth, and news, themore realistic the trading environment becomes. Although the interfaceis shown as a two-pane interface for both recording and playback, eachpane may be displayed separate from the other (e.g., record onlyinterface, playback only interface, etc.). Before describing therecording and playback portion, the user can access additionalfunctionality by using the menu bar 742.

An example menu bar 742 is shown as a bar displayed on the interface.Names of available menus are displayed in the menu bar 742 and the namesinclude File, Edit, View, and Help. Of course, other types of menus maybe used, depending on how it is programmed. Each menu can be selected bychoosing one with the keyboard or with a mouse (or some other inputdevice) to cause a list of options in that menu to be displayed. Forexample, the File menu might include the following options:

New Opens a new instance of the trading simulator. Open Opens a filesearch dialog box to select a saved instance of a file. Save Opens afile search dialog box to save the current trading application sessionfor later replay. Save As Opens a file search dialog box to save thecurrent training application session under a different name/location forlater replay. Recent File Provides a list of the most recentlyrecorded/replayed files. Exit Exits the current training applicationsession

The edit menu might include the following options:

Undo Undoes the prior command. Cut Cuts the selected information andmoves it to the operating system's clipboard. Copy Copies the selectedinformation to the operating system's clipboard. Paste Pastes thecontents of the operating system's clipboard in the cursor location.Record Starts the recording function for all populated contracts StartAll in the record pane. Stop All Stops the recording function for allpopulated contracts in the record pane. Replay Play Starts the replayfor the populated windows in the replay pane. Other available optionsinclude: All-plays back all contracts; Live-plays back all livecontracts; Pause-Pauses all contract playback; Repeat-Atomically repeatsall contract playback; and None-Stops playing all contracts. SynchronizeSets the rate at which the market simulator will update its order book(note that this is not always equal to the speed of playback). Rate Setsthe rate at which the data feed will replay in the replay pane windows.Immediate Replaces all order depth for every update. Update ProgressiveReplaces order depth slowly over time. Update

The record pane 700 is used to control the recording functions oftrading simulator. As shown, the record pane 700 is split into a numberof separate cells used to control the recording of a particulartradeable object. More record panes may be displayed in the window torecord more than one type of tradeable object. The recording fields andcontrols provided in the record pane might include:

Contract Name of the tradeable object being recorded. The name may Namebe color-coded which changes to reflect the status of the 702 exchangeconnection: White might mean that the market simulator is about toconnect to the date feed. Yellow might mean that the market simulator istrying to connect to the data feed. Black might mean that the marketsimulator is connected to the data feed. Red might mean that the marketsimulator was unable to connect to the data feed. Contract Brings up thecontract selection dialog box for selecting a Selection contract to berecorded (as opposed to using drag-and-drop). 704 File Saved Name of thefile to which the recording is saved. This file 706 name may be colorcoded so that when playing in the replay pane at the same time the fileis being recorded, both will be the same color to make it easier tomatch record/replay functions. Record When checked initiates recordingof the data for this check box tradeable object. 708 Data Indicates thetotal number of orders that has been recorded. 710

To record a tradeable object using the recording pane 700, a user caneither drag-and-drop from a window that shows a list of availabletradeable objects or via the contract selection dialog box. Then, theuser can place a check mark in the Record checkbox to begin recording.The number of tradeable objects traded is indicated in the Data 710field, while the location and name of the file being recorded is in theFile Saved 706 field.

The replay pane 712 is used to control the replay functions of tradingsimulator. The replay pane 712 is split into a number of separate cells,each of which is a duplicate of the others and is used to control thereplay of a separate contract. The playback display fields in individualTraining application cells are:

Contract Name Name of the tradeable object being played. The 714 namemay be color-coded which changes to reflect the status of the exchangeconnection: White might mean that the market simulator is about toconnect to the date feed. Yellow might mean that the market simulator istrying to connect to the data feed. Black might mean that the marketsimulator is connected to the data feed. Red might mean that the marketsimulator was unable to connect to the data feed. Contract Brings up thecontract selection dialog box for Selection selecting a contract to bereplayed (as opposed 716 to using the drag-and-drop method). File SavedName of the file to which the recording is saved. 718 This file name maybe color coded so that when playing in the replay pane at the same timethe file is being recorded, both will be the same color to make iteasier to match record/replay functions. Open File Button Open a FileOpen dialog box to select a file to open or connect to an active datasource. Replay Tracks the current time of the play back for replayCounter pane 712 (note that this could be outside the range 722 of thedata file if being played synchronized). Synchronization Dropdownselection box is used to configure how Dropdown the time is controlled.In one embodiment, there are 724 three available configurations: FreeRun, which means that the time for this data feed has no connection withany other pane. Sync Master indicates that the replay pane provides amaster time for other panes (stopping, pausing, fast forwarding, etc.,affects all slaves). Synchronized indicates the pane is a slave to theSync Master and therefore uses the time provided by the Sync Master.

Each of the cells in the Replay pane has a series of buttons on thebottom of the cell that controls various aspects of playback. Note thatsome of the buttons also functions as status indicators (Start of Data,Rewind, Fast Forward, and End of Data) and they preferably cannot bereleased, only pressed to bring the replay to the desired state.

Start of Data Moves the replay file to the beginning of the file. Thebutton remains 726 depressed as long as the replay is at the start offile. Rewind Changes the speed of reverse playback from 1 second everysecond to 728 2 sec, 5 sec, 10 Sec, 30 Sec, 1 Min, 2 Min, 5 Min, 10 Min,30 Min, 1 Hr every second. The rewind button remains depressed as longas speed is not 1 Sec per Sec. A tool tip indicated the current speed,which can also be determined by observing the increment in which thereplay clock is changing. Pressing Rewind when playing forward causesthe playback to go in a backward direction at the same speed it wasgoing forward. Back Plays backward at normal (1 sec per sec) speed andreleases all other 730 buttons (other then Auto Rewind). Button remainsdepressed as long as playing the data backward. If clicked whiledepressed the playback will stop and the button will be released, unlessthe playback speed is not the normal speed in which case the replayspeed will be reset normal speed and the Rewind button will be released.If replay reach the Start of Data then the Start of Day button isdepressed automatically. Pause Stops the replay at the current time (asindicated by the replay clock) 732 and keeps control of the orderbook—if trading occurs the tool will attempt to maintain the correctmarket conditions. Pause is different from stop, when the replay stops,there is no control of the order book-no attempt to maintain the currentmarket conditions is made. Play or Back button is pressed while in Pausethen the replay takes a single step in the appropriate direction, afterthe step is taken the replay stays in a paused state. Play Plays forwardat normal (1 sec per sec) speed and releases all other 734 buttons(other then Auto-repeat). Button remains depressed as long as playingthe data forward. If clicked while depressed the playback will stop andthe button will be released, unless the playback speed is not the normalspeed in which case the replay speed will be reset normal speed and theFast Forward button will be released. If replay reach the End of Datathen the End of Day button is depressed automatically. Forward Playsforward at normal (1 sec per sec) speed and releases all other 736buttons (other then Auto Rewind). Button remains depressed as long asplaying the data forward. If clicked while depressed the playback willstop and the button will be released, unless the playback speed is notthe normal speed in which case the replay speed will be reset normalspeed and the Forward button will be released. If replay reach the Startof Data then the Start of Day button is depressed automatically. FastForward Changes the speed of forward playback from 1 second every second738 to 2 sec, 5 sec, 10 Sec, 30 Sec, 1 Min, 2 Min, 5 Min, 10 Min, 30Min, 1 Hr every second. Button remains depressed as long as speed is not1 Sec per Sec. A tool tip indicated the current speed, which can also bedetermined by observing the increment in which the replay clock ischanging. Pressing Fast Forward while playing backward causes theplayback to go in a forward direction at the same speed it was goingbackward. End of Data Moves the replay time to the end of the replayfile. The button 740 remains depressed as long as the replay is at theend of file. If repay file is associated with a current recording, thenpressing End of Day will start a Live replay; this will also cause thePlay button to be depressed. While in Live replay, the foreground colorof the file name in both the record and playback panes will be changedto match each other. Auto Repeat When pressed, if playing forward movesthe current replay time to start of Data every time End of Data isreached. If playing backwards moves the current time to End of Dataevery time Start of Data is reached. This button is disabled when doinga Live replay.

CONCLUSION

The foregoing description is presented to enable one of ordinary skillin the art to make and use the invention. Various modifications to thepreferred embodiment will be readily apparent to those skilled in theart and the generic principles herein may applied to other embodiments.Therefore, it should be understood that the above description of thepreferred embodiments, alternative embodiments, and specific examplesare given by way of illustration and not limitation. For example, itshould be known that the system could be modified to record any type ofdata that might be useful for trading. The data can be stored using anytype of data format; whichever is most desirable for a particular systemor storage unit. The trading simulator, which plays back the data, mightinclude more or fewer order books to track the recorded market and thesimulated market. As previously mentioned, different algorithms forequalizing the two order books can be used. The simulated exchange canbe modified to accommodate different matching algorithms. The interfacefor recording the data and playing back the data can be modified toincorporate more of fewer features. Consequently, these and otherchanges and modifications within the scope of the present embodimentsmay be made without departing from the spirit thereof, and the presentinvention includes all such changes and modifications.

1. A system including: a computing device, wherein the computing deviceis configured to receive market updates corresponding to a tradeableobject from a live market at an electronic exchange, each market updatecomprising a plurality of price levels and an order quantity to buy orsell the tradeable object at each of the plurality of price levels,wherein the computing device is configured to receive simulated marketdata comprising order and fill information from a simulated exchange,wherein the computing device is configured to generate a plurality ofsimulated orders based on the market updates and the simulated marketdata, and wherein the computing device is configured to send theplurality of simulated orders to the simulated exchange, wherein thesimulated exchange matches a plurality of orders received from a clientdevice and the plurality of simulated orders to generate the simulatedmarket data.
 2. The system of claim 1, wherein the simulated exchangeimplements a user configurable algorithm.
 3. The system of claim 1,wherein the computing device is further configured to provide atime-stamp for each market update as the market updates are receivedfrom the live market at the electronic exchange, and to store thetime-stamped market updates.
 4. The system of claim 3, wherein thecomputing device is further configured to retrieve the market updates inreal time as the market updates are received from the electronicexchange.
 5. The system of claim 3, wherein the computing device isfurther configured to retrieve the market updates later in time thanwhen the market updates are received from the electronic exchange. 6.The system of claim 3, wherein the computing device is furtherconfigured to navigate information stored from the market updates,wherein to navigate the information, the computing device is configuredto perform at least one of rewinding and fast forwarding theinformation.
 7. The system of claim 1, wherein the computing device isfurther configured to receive news data as the market updates arereceived from the electronic exchange, and responsively, time stamp thenews data and store the time-stamped news data.
 8. The system of claim1, wherein the market updates comprise at least one of inside marketinformation and market depth information.
 9. The system of claim 8,wherein the inside market information comprises a best bid price and abest ask price, and wherein the market depth information comprisesquantities at the plurality of price levels.
 10. The system of claim 1,wherein the computing device is further configured to generate an orderbook based on the market updates received from the electronic exchange.11. The system of claim 10, wherein the computing device is furtherconfigured to generate a simulated order book based on the simulatedmarket data received from the simulated exchange.
 12. The system ofclaim 11, wherein the plurality of simulated orders are generated toequalize the order book and the simulated order book to reflect a nextstate of market data in the order book.
 13. The system of claim 1,wherein at least one simulated order corresponding to the plurality ofsimulated orders comprises an order to delete an order quantity at aprice.
 14. The system of claim 1, wherein at least one simulated ordercorresponding to the plurality of simulated orders comprises an order tobuy or sell an order quantity at a price.